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QuickBooks 2011 Student Guide

Using Other Accounts in QuickBooks

Lesson 5

Lesson 5: Using Other Accounts in QuickBooks 1

Lesson Objectives

To introduce the other account types available in QuickBooks

To learn how to track credit card transactions in QuickBooks

To reconcile a credit card account

To see how to make a credit card payment

To discuss the different types of asset and liability accounts you can create and see how to track assets and liabilities in QuickBooks.

To introduce the subject of equity and QuickBooks equity accounts

Notes


Other Account Types in QuickBooksIn this lesson, you’ll learn about these types of QuickBooks Accounts:

Credit card accounts—Used to track transactions you pay for with a credit card.

Asset accounts— Used to track both current assets (those assets you’re likely to convert to cash or use up within one year, such as inventory on hand) and fixed assets (such as long-term notes receivable and depreciable assets your business owns that aren’t liquid, such as equipment, furniture, or a building).

Liability accounts—Used to track both current liabilities (those liabilities scheduled to be paid within one year, such as sales tax, payroll taxes, and short-term loans) and long-term liabilities (such as loans or mortgages scheduled to be paid over terms longer than one year).

Equity accounts—Used to track owner’s equity, including capital investment, draws, and retained earnings.

Notes


Entering Credit Card ChargesQuickBooks lets you choose when you enter your credit card charges. You can enter credit card charges when you charge an item or when you receive the bill. Your choice depends on whether you like to enter information into QuickBooks incrementally or all at once. The advantage to entering charges when you charge an item is that you can keep close track of how much you owe. In addition, if the charge is for a particular job, you can keep track of how much you’re spending on that job.

To enter a credit card charge:

1. From the banking menu, choose Enter Credit Card Charges.

2. In the Credit Card field, select CalOil Card from the drop-down list.

3. In the Purchased From field, select Bayshore CalOil Service from the drop-down list.

4. Click in the Amount Field, and then double-click to select the entire amount.

5. Type 30 and then press Tab.

6. Click the Expenses tab.


7. In the detail area, click the Account column and assign the charge to the Automobile: Fuel expense account.

8. Click Save & Close to record the transaction and close the window.

Notes


Reconciling a Credit Card StatementTo reconcile a credit card statement:

1. From the Company menu, choose Chart of Accounts.

2. Click CalOil Card in the list once to select it.

3. Click the Activities menu button, and then choose Reconcile Credit Card.

4. In the Statement Date field, enter 12/15/2015.

5. In the Ending Balance field, type 101.02.


6. Click Continue.

Notes


Marking Cleared TransactionsTo mark the transactions as cleared:

1. In the “Charges and Cash Advances” section of the window, select all three charges.

2. In the “Payments and Credits” section of the window, select the 12/02/15 payment for $135.80

3. Click Reconcile Now.


4. For this exercise, you want to write a check for payment now, so leave that option selected and click OK.

5. In the Select Reconciliation Report window, select Detail and then click Display.

6. Click OK at the message QuickBooks displays.

7. Review the report and then close it.

Notes


Paying a Credit Card BillTo write a check for the bill now:

1. In the Write Checks window, make sure Checking is listed as the bank account.

2. Click in the Pay to the Order of field and select CalOil Company as the name of the credit card company.

3. Click the To be printed checkbox to select it.

4. Click Save & Close to record the transaction.

5. Close the chart of accounts.

Notes


Working with Asset AccountsAn Other Current Asset account tracks assets that are likely to be converted to cash or used up within one year. If you buy and sell inventory, the value of all your inventory on hand is usually shown in an Other Current Asset account called something like “Inventory Asset.” Other current assets might include treasury bills, certificates of deposit, prepaid expenses, prepaid deposits, reimbursable expenses, and notes receivable (if due within one year).

A Fixed Asset account tracks assets your business owns that are not likely to beconverted into cash within a year. A fixed asset is usually something necessary forthe operation of your business, like a truck, cash register, computer, or photocopier.

To set up an Other Current Asset account:1. On the Home page, click Chart of Accounts.

2. Click the Account menu button, and then choose New.

3. Click Other Account Types and choose Other Current Asset from the drop-down list.

4. Click Continue.


5. In the Account Name field, type Prepaid rent.

6. Click Enter Opening Balance.

7. In the Opening Balance field, type 6000 and then select the date 12/14/2015.

8. Click OK.

9. Click Save & Close.


Setting Up Asset Accounts to Track Depreciation

Fixed assets are equipment or property your business owns that are not for sale. Since they last a long time, you don’t completely charge their cost to the year in which you buy them. Instead, you spread their cost over several years. But because fixed assets wear out or become obsolete, their value declines constantly from the day you purchase them. The amount of this decline in value is called depreciation.

To set up asset accounts to track depreciation on a new trailer purchased by Rock Castle Construction:

1. In the chart of accounts window, click the Account menu button, and then choose New.

2. Select Fixed Asset and click Continue.

3. In the Account Name field, type Trailer.


Notes


Setting Up Asset Accounts to Track Depreciation

To add subaccounts:

1. In the chart of accounts window, click the Account menu button, and then choose New.

2. Select Fixed Asset and click Continue.

3. In the Account Name field, type Cost.

4. Select the “Subaccount of” checkbox, and select Trailer as the parent account.

5. Leave the opening balance blank.

6. Click Save & New


7. Repeat steps 3, 4, and 5 to add a second subaccount to the Trailer fixed asset account. Call the subaccount Depreciation, and leave the opening balance blank.

8. Click Save & Close to save the Depreciation subaccount.

Notes


Entering Depreciation TransactionsTo enter a transaction for depreciation:

1. In the chart of accounts, select the Depreciation subaccount for the trailer.

2. Click the Activities menu button, and then choose Use Register.

3. In the Decrease column, type 1300 and press Tab. This is the depreciation amount.

4. In the Account field, select Depreciation Expense from the drop-down list

5. Click Record.

6. Close the register window.

Notes


Tracking a Loan with a Long-Term Liability Account

A Long-term Liability account tracks debts that your business is not likely to pay off within a year. The most common long-term liabilities are loans that you expect to pay off in more than one year.

Tracking a loan with a long-term liability account:

1. In the chart of accounts, click the Account menu button, and then choose New.

2. In the Add New Account window, select Other Accounts Types and then choose Long Term Liability from the drop-down list.

3. Click Continue.

4. In the Account Name field, type Trailer Loan.

5. Do not enter an Opening Balance.




Because this is a new loan, you are either receiving money to deposit in your bank account or receiving a new asset. In this example, you received an asset (the new trailer), so you need to show an increase in the asset’s Cost account.

To record an increase in the asset’s Cost account:

1. In the chart of accounts, double-click the Trailer:Cost subaccount.

2. In the increase field, type 30,000.

3. In the Account field, select the Trailer Loan liability account.

4. Click Record.

5. Close the register window.

6. Close the chart of accounts.

Notes



You can enter the Trailer on the Fixed Asset Item list. Tracking fixed assets using the Fixed Asset Item list enables you to record such information about an asset as purchase date and price, whether the asset was new or used when purchased, and the asset's sale price if you decide to sell it. You can also generate customizable reports listing all your fixed assets.

To create a fixed asset item:

1. From the Lists menu, choose Fixed Asset Item List.

2. Click the Item menu button, and select New.

3. In the Asset Name/Number field, type Trailer.

4. Enter the following information to complete the Purchase Information section:

Item is: New Purchase Description: Trailer Date: 12/15/2015 Cost: 30,000 Vendor/Payee: East Bayshore Auto Mall


5. Enter the following information to complete the Asset Information section:

Asset Description: White trailer with company logo

Serial Number: 123456789

Warranty Expires: 12/15/2020

Notes


6. From the Asset Account drop-down list, choose Trailer:Cost.

7. Click OK.

8. Close the Fixed Asset Item list.

Notes


Recording a payment on a loan

When it's time to make a payment on a loan, use the Write Checks window to record a check to your lender. Assign part of the payment to a loan interest expense and the remainder to loan principal.

To record a payment on a loan:

1. From the Banking menu, choose Write Checks.

2. In the “Pay to the Order of” field, type Great and then press Tab.

3. For the dollar amount of the check, type 500.00.

4. Click in the Account column on the Expenses tab and choose the Interest Expense: Loan Interest expense account from the drop-down list.

5. In the Amount column highlight the amount that QuickBooks prefilled and then type 225.00.

6. Assign the remainder of the expense ($275.00) to the Trailer Loan liability account.

7. Click Save & Close to record the payment.


When you record the transaction, QuickBooks automatically updates the accounts affected by this transaction:

In your checking account, QuickBooks subtracts the amount of the check from your balance.

In the expense account that tracks interest, QuickBooks enters the interest amount as an increase to your company's interest expense.

In the Trailer Loan liability account, QuickBooks subtracts the principal amount from the current value of the liability (reducing the amount of your debt).

Notes


Lesson 5: Using Other Accounts in QuickBooksReview questions

1. Accumulated depreciation is typically set up as what type of account in QuickBooks?

a A subaccount of a fixed asset accountb A subaccount of a current asset accountc A subaccount of a liability accountd An expense account

2. Equity type accounts would be used to track which of the following?

a Capital investmentsb Drawsc Retained Earningsd All of the above

3. Which of the following would likely be considered a long-term liability?

a Vehicle loanb Accounts payablec Rentd Credit card account

4. Retained Earnings is defined as which of the following?

a The amount of money that a business retains for paying its employeesb The earnings from non-essential business servicesc The amount of interest saved from paying off a loan earlyd The accumulation of a company’s net income or loss from its start date

5. Which of the following would not decrease the value of a company’s equity?

a The company paying corporate dividendsb The company incurring a net loss for the fiscal yearc An owner drawing money out of the companyd The company taking a loan out to purchase a new asset


Review activitiesAssume that the owner of Rock Castle Construction has taken out a loan and purchased a computer system for $15,000. He wants to track the accumulated depreciation and cost of the system in two separate fixed asset accounts.

1. Create a fixed asset account called Computer System and two subaccounts—one for Cost and one for Accumulated Depreciation.

2. Create a long-term liability account to track the loan.

3. Enter the amount of the loan as an increase in the asset’s Cost account. Assign the transaction to the loan liability account.


Answers to review questions1. Accumulated depreciation is typically set up as what type of account in QuickBooks?

a A subaccount of a fixed asset accountb A subaccount of a current asset accountc A subaccount of a liability accountd An expense account

2. Equity type accounts would be used to track which of the following?

a Capital investmentsb Drawsc Retained Earnings

d All of the above

3. Which of the following would likely be considered a long-term liability?

a Vehicle loanb Accounts payablec Rentd Credit card account

4. Retained Earnings is defined as which of the following?

a The amount of money that a business retains for paying its employeesb The earnings from non-essential business servicesc The amount of interest saved from paying off a loan early

d The accumulation of a company’s net income or loss from its start date

5. Which of the following would not decrease the value of a company’s equity?

a The company paying corporate dividendsb The company incurring a net loss for the fiscal yearc An owner drawing money out of the company

d The company taking a loan out to purchase a new asset


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